'Wake-up call' to bosses: utes no tax-free perk for staff on weekends

Tradies and others who get vehicles such as utes as salary-packaged benefits may find their bosses take away those perks following recent revised guidance from the Australian Taxation Office (ATO).

In early July the tax office revealed dodgy work expense claims are a major contributor to what the agency estimates may be $8.7 billion of uncollected tax each year, and in the same week also finalised its stance on guidelines around Fringe Benefits Tax (FBT) on work vehicles.

The ATO allows up to 1000 kilometres of private travel in company cars each year, as long as no single return journey exceeds 200 kilometres.

For some time, ATO guidelines have allowed “minor, infrequent and irregular” private use of these vehicles.

The ATO’s new guidance, which will apply for the 2019 FBT year and onwards, clarifies what "minor, infrequent and irregular” private use is.

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It allows up to 1000 kilometres of private travel in company cars each year, as long as no single return journey exceeds 200 kilometres.

Murray Howlett, a tax partner at Brisbane-based Pilot Partners, said the revised guidance could result in employers paying a lot more tax or offering fewer perks to attract new employees.

The ATO does not collect data on how many utes are being claimed under the FBT exemption but its annual report states it collected $4.4 billion in total FBT in 2016-17.Credit:AP

Stopping at the grocery store, or to pick up children from school or sports training, may no longer be allowed under the new rules, he said.

Failing to comply may result in 20 per cent FBT impost on the cost of the vehicle.

Murray Howlett, Pilot Partners

And failing to comply may result in a 20 per cent FBT impost on the cost of the vehicle.

“This means for example the FBT payable on a Toyota HiLux 4x4 SR5 double cab pick-up ute valued at $54,990 would be $10,753 per annum,” he said.

Mr Howlett said the change required a “big mind shift for employers who, for many years, have turned a blind eye to FBT”.

“It also means that some of them will no longer be able to dangle the carrot of a work-related vehicle to attract staff,” he said.

Institute of Public Accountants tax expert Tony Greco said the ATO could in future undertake a “compliance blitz” to make sure the rules were being followed correctly.

Institute of Public Accountants tax expert Tony Greco said the ATO could in future undertake a “compliance blitz”.Credit:Peter Braig

He said concessional FBT treatment might in part explain why Toyota Hi-Lux and Ford Ranger four-door utes are two of the biggest selling vehicles in Australia.

“They double as a family vehicle on the weekend and a work ute during the week,” he said.

But now, if you live more than 1000 kilometres away from your employer, the car cost is no longer FBT exempt.

Mr Greco said it was a wake-up call to employers. “The onus is on employers to reestablish the rules with employees,” he said.

But an ATO spokeswoman said while the revised guidance was aimed at helping employers, where the agency identifies cases of non-compliance, “we will work with employers to help them get it right”.

“We currently have an FBT engagement program in place which includes significant communication and education components to assist and inform employers about their FBT obligations,” she said.

The ATO does not collect data on how many utes are being claimed under the FBT exemption but its annual report states it collected $4.4 billion in total FBT in 2016-17.

Elizabeth Lucas, partner and head of national specialist tax at Grant Thornton said it was unlikely lots of employers would take away utes as perks. “There are a huge number of employees and employers relying on this FBT exemption," she said.